What is the effect of the Area Franchisee's act of default under the Checkersrallys agreement?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
If Area Franchisee commits any act of default under this Agreement for which Franchisor exercises its right to terminate this Agreement, Area Franchisee shall pay to Franchisor all actual, consequential, special and incidental damages Franchisor incurs as a result of the premature termination of this Agreement regardless of whether or not such damages are reasonably foreseeable. Area Franchisee acknowledges and agrees that the proximate cause of such damages sustained by Franchisor is Area Franchisee's act of default and not Franchisor's exercise of its right to terminate. Notwithstanding the foregoing, and except as otherwise prohibited or limited by applicable law, any failure, neglect, or delay of a party to assert any breach or violation of any legal or equitable right arising from or in connection with this Agreement, shall constitute a waiver of such right and shall preclude the exercise or enforcement of any legal or equitable remedy arising therefrom, unless written notice specifying such breach or violation is provided to the other party within 12 months after the later of: (a) the date of such breach or violation; or (b) the date of discovery of the facts (or the date the facts could have been discovered, using reasonable diligence) giving rise to such breach or violation.
Source: Item 23 — RECEIPTS (FDD pages 92–384)
What This Means (2025 FDD)
According to the 2025 Checkersrallys Franchise Disclosure Document, if an Area Franchisee defaults on the Area Franchise Agreement and Checkersrallys terminates the agreement as a result, the Area Franchisee is responsible for paying Checkersrallys all actual, consequential, special, and incidental damages that Checkersrallys incurs due to the early termination. This holds true regardless of whether these damages were reasonably foreseeable.
The Checkersrallys agreement specifies that the Area Franchisee's act of default is the direct cause of these damages, not Checkersrallys's decision to terminate the agreement. This clause aims to protect Checkersrallys from losses stemming from an Area Franchisee's failure to uphold their contractual obligations.
However, the agreement also states that any failure, neglect, or delay by either party to assert a breach of the agreement does not act as a waiver of that right, provided that written notice specifying the breach is given to the other party within 12 months of the later of the date of the breach or the date the facts of the breach were discovered (or could have been discovered with reasonable diligence). This ensures that both Checkersrallys and the Area Franchisee must promptly address any breaches to maintain their rights under the agreement.